Smartcard market explodes

1 November 2004

The smartcard industry is poised for an unprecedented explosion in South Africa, with three large-scale rollouts set to begin in 2005 and several more waiting in the wings. More than 50-million smartcards are expected to be issued in 2004 and 2005 combined. And, by 2009, more than 100-million smartcards will be in active use in South Africa. These are the key findings contained in the Smart Card Trends and Deployment in SA 2004 report, released recently by World Wide Worx and Razor's Edge Business Intelligence.

The report focuses on what are known as 'memory cards' and 'microprocessor cards', which are in effect plastic cards containing a small microchip. Memory cards allow only for the storage of data, whereas microprocessor cards allow for information to be added, deleted or manipulated. Both types are also known as chip cards, thanks to the computer chip embedded in the card.

From 1 January 2005, all new credit and debit cards issued in South Africa are required to be smartcards, meaning a roll-out of a minimum of about 12-million smartcards to banking customers over the next five years. The single biggest smartcard project this country will see, however, will be the new Home Affairs National Identification System, known as HANIS, which will require the replacement of identity documents with around 30-million smartcards - one for every eligible South African - during the same five-year period.

Telkom and the mobile network operators are expected to add another 20-million cards in 2005 alone, through the issue of new prepaid and SIM cards, while all pension payments handled by the Department of Social Welfare are expected to move to a smartcard system from 2005 onward, following successful projects in most provinces.

"More than a third of all South Africans already hold a smartcard in their hands indirectly, thanks to the SIM cards in their cellular phones," says Arthur Goldstuck, MD of World Wide Worx. "Now they will start getting to grips with the card itself as it becomes an everyday tool."

Arthur Goldstuck, World Wide Worx

The reason for the explosion in smartcard usage is simple: it is more secure than any other identification technology that is economically viable and available, can contain updateable information ranging from personal details to fingerprints to identification photos, and is far less prone to forgery than existing systems.

Says Bruce Conradie, MD of Razor's Edge Business Intelligence, "We will begin to see an unprecedented range of applications for smartcards from 2005 onward, starting with the telecommunications cards we already have and extending to financial services. But it will not be long before almost every service that requires some form of identification or secure payment will take advantage of smartcard technology."

The massive smartcard rollout will require major upgrading and acquisition of new equipment - all retailers who accept cards will have to be ready for smartcards next year - as well as a clear understanding of what smartcard technology is best for what purpose.

"Not only do we have memory cards and microprocessor cards, but each of these offers two different categories of technology," says Conradie. "Contact cards and contactless smartcards dictate what kind of card reader has to be in use, since contact cards must be inserted into a reader, or swiped, while contactless cards only have to be passed near the reader."

Contactless cards have both a microchip and an antenna embedded in the card, which allows for it to be detected at a small distance by the reader. Many South Africans already use such technology without realising it, for accessing restricted areas, paying for road tolls, or managing agricultural stock control.

"The most promising applications we have seen so far involve pension payouts," says Goldstuck. "It shows how the technology can be used today by the most disadvantaged members of our society in the remotest areas and with a minimum of information at their disposal. Imagine how much more it can do for South Africans in the future."

The Smart Card Trends and Deployment in SA 2004 report is available from World Wide Worx. More information can be obtained at http://www.theworx.biz.